Late last week, the Associated General Contractors of America (AGC) continued its campaign to persuade the U.S. Small Business Administration (SBA) to change the way it decides whether to forgive Paycheck Protection Program (PPP) loans of over $2M. The specific target of AGC’s campaign is a Loan Necessity Questionnaire that has greatly surprised and frustrated the borrowers of such loans, as they now seek forgiveness of them.
AGC continued its campaign with a second set of extensive comments on the SBA form, which the agency intends to help it evaluate the certifications that borrowers had to make – at the time they applied for their loans – that “economic uncertainty” made their loans necessary to “support” their “ongoing” operations. AGC’s letter pointed out that the form makes absolutely no inquiry into the nature or scope of borrowers’ uncertainty. The letter then explained that the form distorts the plain meaning of words like “support and “ongoing,” requiring borrowers to show more that the certification reasonably required. The letter maintained that borrowers only need to show that they had grounds for believing “a loan would . . . help [them] continue to operate at least at the level necessary to forego furloughs or layoffs.” Finally, the association identified specific flaws in in each of the questions relevant to construction contractors.
In the background of the association’s latest action was the legal complaint that AGC filed against SBA on December 8, 2020. That complaint observed that SBA had developed the form in complete secrecy and asserted that the form violated the Paperwork Reduction Act, the Administrative Procedures Act, and the Fifth Amendment. In response to the complaint, SBA quickly released new and promising but still vague guidance on the form. Within weeks, SBA also announced that it would give the public another 60 days to comment on the form and would “submit any resulting amendments . . . to the Office of Management and Budget (OMB) for approval.”
AGC filed its second set of comments on the form in response to that announcement. AGC filed its first set of comments in November of 2020 in response to an earlier announcement. In its earlier comments, AGC reminded the agency of the conditions that existed in March and April of 2020 – when federal officials were repeatedly encouraging firms to apply for PPP loans, when the economic uncertainty confronting the industry was unprecedented, and when the vast majority of the construction contractors that successfully applied for loans of over $2M signed their certifications. In its earlier comments, AGC also recounted the reasons why construction contractors require a substantial amount of working capital.
The original deadline for SBA to respond to AGC’s legal complaint was February 12, 2021. As that deadline approached, the agency’s lawyers sought a 45-day extension of time to file either an answer or some other response. For strategic reasons, and in the hope that its other initiatives would eventually bear fruit, and AGC agreed to extend that deadline to March 29, 2021.
Over the next few weeks, AGC will be deciding on its next legal moves. In the interim, if you are inclined to share your own thoughts on the form with the agency, please know that you can send them to SBA’s Ombudsman at any time. While comments submitted to the Ombudsman will not go into the record of the administrative proceeding, they can still have an impact on the future of SBA’s Loan Necessity Questionnaire.